Important News on Many Important Fronts 07-30-15

Last week was the worst week for the S&P 500 since March and for the Dow Industrials since January; the earnings reports for many companies disappointed and commodity shares slid. Yields for U.S. Treasuries declined, and this, thankfully, was a significant factor that helped some income groups, such as REITs, to outperform. Even the utilities have outperformed in the last month, although the group remains an underperformer year-to-date.

China has rocked the markets too, replacing Greece as a main point of concern. Still, we think that the Fed meeting—and the guidance provided there—is the main event of the week as concerns U.S. stocks. Early in the week, despite the dismal performance of equities in China, the U.S. market declined some, but overall has held its own. Read more about Important News on Many Important Fronts 07-30-15

Relief Rally Pause 07-23-15

Last week, the markets staged a rally. The relief stemming from the news on Greece, as we wrote to you, was almost palpable; stocks in Europe rose, with the nine-day STOXX Europe 600 index rally (the longest since April 2014) interrupted only on Tuesday.

The S&P 500 index, likewise, rallied until Tuesday when corporate earnings disappointed investors. The U.S. Treasuries reversed their earlier decline, having turned higher (and yields lower) in the middle of the trading day, indicating a flight to safety. Yesterday, the stocks fell more, led by tech; today, the market fell again.

Still, we believe that, at least for some companies, the weakness should prove temporary.

Take IBM (IBM) for instance. The shares declined on Tuesday, dragging along the Dow Industrials down as well, as market participants read the after-hours Monday earnings report with disappointment; we disagree.  Read more about Relief Rally Pause 07-23-15

Relief Rally Pause 07-23-15

Last week, the markets staged a rally. The relief stemming from the news on Greece, as we wrote to you, was almost palpable; stocks in Europe rose, with the nine-day STOXX Europe 600 index rally (the longest since April 2014) interrupted only on Tuesday.

The S&P 500 index, likewise, rallied until Tuesday when corporate earnings disappointed investors. The U.S. Treasuries reversed their earlier decline, having turned higher (and yields lower) in the middle of the trading day, indicating a flight to safety. Yesterday, the stocks fell more, led by tech; today, the market fell again.

Still, we believe that, at least for some companies, the weakness should prove temporary.

Take IBM (IBM) for instance. The shares declined on Tuesday, dragging along the Dow Industrials down as well, as market participants read the after-hours Monday earnings report with disappointment; we disagree.  Read more about Relief Rally Pause 07-23-15

Optimists Win Again 07-16-15

The big news today is the pledge from the European Central Bank (ECB) to stimulate the regional economy and what seems likely to be at least a temporary end to the debt crisis in Greece. The markets have responded favorably today to the passage, through the Greek parliament, of an austerity plan, putting the S&P 500 Index within striking distance of its all-time high. Given the apparent reduction in the need for safety, U.S. Treasuries declined.

In Europe, meanwhile, the Stoxx Europe 600 Index gained some 1.5 percent by the time trading closed for the day. The euro declined to its lowest level in seven weeks, and demand for safe haven declined – reflected in the lower prices for Treasuries. Read more about Optimists Win Again 07-16-15

Safety First 07-09-15

As markets deteriorated globally this week, in response to the Greek referendum and uncertainty about that country’s continued membership in the euro, investors once again sought the relative safety of the U.S. dollar and Treasuries as well as German bunds. Yesterday, the yield on 10-year Treasuries fell to 2.22 percent, compared to 2.43 percent at the start of the month (still up for the year, which it began at 2.12 percent). The euro, not surprisingly, weakened to a five-week low against the greenback.

In the midst of all this, the European Central Bank (ECB) emphasized its role as a lender of temporary liquidity assistance. There could be some “moral hazard,” the bank said, to offering emergency liquidity assistance (ELA) except “to support solvent credit institutions facing temporary liquidity problems.” ELA, it said, “is not a monetary policy instrument.”
Read more about Safety First 07-09-15

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